If you work in workers’ compensation, you work in economics. You may not think of it that way. But every policy you write is priced off payroll. Every claim you manage is shaped by wage levels, employment patterns, and the industries that are hiring or cutting. When the economy shifts, workers’ comp feels it. Sometimes immediately. Sometimes with a lag that makes it harder to see coming.
That’s why Stephen Cooper’s session at AIS 2026 matters. As NCCI’s Executive Director and Senior Economist, Cooper has been tracking the intersection of macroeconomic trends and workers’ compensation outcomes since joining NCCI in 2023. His session, The State of the Economy and Its Impact on WC, will provide an in-depth look at where the economy stands heading into the second half of 2026 and what that means for the workers’ compensation system.
I’ll be in the room for that one. But the economic picture heading into AIS is already telling us a lot about what’s ahead.
The 2025 Paradox: Resilient Growth, Stalling Hiring
NCCI’s Q1 2026 Quarterly Economics Briefing laid out a year that defied simple characterization. Real GDP growth for 2025 came in at 2.0%, a modest deceleration from 2024’s 2.4% pace but still close to what economists had forecast at the start of the year. By that measure, the economy held up.
But the labor market told a very different story. The U.S. added just 116,000 net new jobs for all of 2025. That’s the slowest pace of job growth outside of a recession since 2003. And the weakness wasn’t distributed evenly. Health care and social assistance accounted for over 686,000 new positions, which means every other sector combined shed more than half a million jobs over the course of the year.
For workers’ compensation professionals, that gap between GDP resilience and labor market weakness creates a set of competing signals that are hard to plan around.
What a Hiring Slowdown Means for Premium
Workers’ compensation premium is a function of payroll, and payroll is a function of employment and wages. When hiring slows, the employment component of payroll growth weakens. The question is whether wage growth can compensate.
So far, it has. NCCI noted in its Q1 2026 briefing that wage growth remained surprisingly elevated in 2025, even in sectors that were losing jobs. That kept overall payroll growth close to pre-pandemic averages and cushioned the impact on premium volume. At AIS 2025, Cooper reported that payroll increased 5% in 2024, consisting of roughly 1% from employment and 4% from wages, with the strongest gains in healthcare, leisure and hospitality, and construction.
But the sustainability of that wage growth is an open question. NCCI identified two possible paths: if hiring stays flat, wages will likely face downward pressure as employers compete less aggressively for talent. If hiring rebounds, wages could hold. Either way, the payroll math that underpins premium volume is more fragile than it has been in recent years.
For carriers and administrators already navigating a premium environment that shrank 3.2% in 2024, this is worth watching closely. Rate decreases continue to compress premium even when payroll grows. If payroll growth also softens, the squeeze on the top line gets tighter.
The Frequency Upside You Might Not Expect
Here’s where the economic story gets interesting for workers’ comp. A slow hiring environment may be helping frequency trends.
NCCI’s research has consistently shown that short-tenured workers, those with fewer than 12 months on the job, are roughly twice as likely to file a lost-time claim compared to more experienced colleagues. Workers in their first year of employment account for an estimated 35% to 43% of work injuries or workers’ compensation claims, based on data from the Bureau of Labor Statistics, private insurers, and NCCI’s indemnity data call.
When hiring slows and voluntary quits decline, the pool of short-tenured workers shrinks. In 2025, the U.S. averaged about 5.3 million hires per month, down from roughly 6.4 million per month during the 2022 “Great Reshuffle.” That translates to approximately 14 million fewer new workers cycling through the economy over the course of the year, and 14 million fewer people in that elevated-risk, low-tenure category.
This is likely one of the factors contributing to the faster-than-average frequency decline we’ve seen in recent years. At AIS 2025, NCCI reported that lost-time claim frequency fell 5% in 2024, later revised to 6% in the year-end update. The long-term average annual decline is about 3.6%. The labor market’s role in that acceleration doesn’t get enough attention.
This creates a strategic question for carriers: if the economy strengthens and hiring accelerates, will frequency tick back up as more inexperienced workers enter the labor force? Past recessions and recoveries suggest yes. NCCI’s historical analysis indicates that while short, mild recessions don’t significantly impact workers’ comp, longer downturns can lead to frequency spikes during the recovery phase as employers bring on new employees.
Tariffs, Inflation, and the Medical Cost Question
The tariff environment has been one of the most discussed economic variables since early 2025, and Cooper addressed it directly at AIS 2025 and in subsequent NCCI publications.
For workers’ compensation, tariffs have both direct and indirect impacts. On the direct side, imported durable medical equipment, supplies, and pharmaceuticals face higher prices. NCCI has noted these categories make up roughly 15% of workers’ compensation medical costs. On the indirect side, higher input costs for medical equipment and supplies can eventually push up prices for physician, hospital, and long-term care services as providers pass through costs.
NCCI’s Medical Inflation Insights reporting through early 2026 suggests the impact has been moderate so far. The Workers Compensation Weighted Medical Price Index (WCWMI) showed medical prices growing near 2.5% through most of 2025, lower than both 2023 and 2024. The medical categories most susceptible to tariffs did see a moderate acceleration in price growth toward the end of the year, but the overall pace remains below longer-term averages.
Cooper estimated at AIS 2025 that a realistic tariff impact scenario could push the WCWMI from its then-current 2% rate to approximately 3% to 3.5%. That’s not catastrophic. But it adds pressure to a medical severity trend that was already running at 6% growth in 2024, and it reinforces the point that medical cost management is increasingly about understanding the component pieces, not just the topline number.
Geopolitical Uncertainty as Economic Variable
NCCI’s Q1 2026 briefing introduced geopolitical risk as one of four key themes to watch in 2026, alongside hiring breadth, wage trajectory, and tenure-related frequency effects. Rising geopolitical tensions, particularly related to commodity prices and supply chain disruptions, add another layer of uncertainty to the inflation and employment outlook.
For workers’ comp, the transmission mechanism is indirect but real. Higher energy costs can dampen consumer spending and raise business input costs, potentially prompting employers to reduce headcount. Supply chain disruptions can affect the availability and pricing of medical equipment and pharmaceuticals. And sustained uncertainty can delay hiring decisions, extending the labor market’s slow-growth pattern.
None of these are workers’ comp-specific risks, but they all flow into the system through the same channels: payroll, wages, employment, medical costs, and claim patterns.
What I’ll Be Listening for at AIS 2026
Cooper’s session will give us the most current economic data available, plus NCCI’s interpretation of what it means for the workers’ compensation system. Here’s what I’ll be focused on:
Has employment growth broadened beyond healthcare?
NCCI’s April 2026 Labor Market Insights showed some encouraging signs, with stronger job growth in construction, manufacturing, trade, and leisure and hospitality in March 2026. If that trend holds, it signals a more balanced recovery. If it doesn’t, the concentration risk in healthcare employment has real implications for which classes of business are generating premium growth.
What’s the wage growth trajectory?
Wages have been the unsung stabilizer for workers’ comp premium. If they start softening meaningfully, premium compression accelerates.
How is Cooper framing the tariff and inflation outlook for the back half of 2026?
The moderate impact so far has been reassuring, but the policy environment remains fluid. Medical cost inflation is the place where tariff effects will show up most directly in workers’ comp.
What does NCCI see in the tenure and frequency data?
The connection between fewer new hires and lower claim frequency is one of the most practically useful economic insights for carriers and administrators. I want to know if 2025’s data strengthened or complicated that relationship.
Connecting the Macro to Your Operation
It’s easy to treat the economics session at AIS as background information. Big-picture stuff that’s interesting but hard to act on. That’s a mistake.
The economic forces Cooper will discuss at AIS 2026 directly affect your premium volume, your loss trends, your medical costs, and your staffing needs. If payroll growth slows, your book shrinks unless you’re actively growing through new business. If frequency ticks up because hiring accelerates, your claims operation needs to be ready for higher volume. If medical inflation picks up, your reserving assumptions need to reflect that.
The organizations that turn economic intelligence into operational action are the ones that outperform. That means having systems that can model exposure changes in real time, claims platforms that surface severity trends before they become surprises, and the analytical capability to connect what’s happening in the economy to what’s happening in your book.
Let’s Talk at AIS
I’ll be at AIS 2026 in Orlando May 11-13. If you want to talk about how the economic environment is affecting your specific operation, or how to build the technology foundation that turns data into better decisions, I’d welcome that conversation.
Schedule time to meet with me at AIS 2026.
This is the second in a four-part blog series focused on agenda topics at NCCI AIS 2026. Missed the first article? Check out Ryan’s coverage on the State of the Line here.
